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Charter Communications wants permission to begin charging Netflix, HBO Max, Disney+ and other streamers for the pleasure of efficiently carrying its traffic. In a petition this past week to the Federal Communications Commission, the nation’s second-largest provider of cable TV and internet services cited the flourishing online video marketplace and asked for a sunset of two notable conditions imposed on Charter’s 2016 merger with Time Warner Cable and Bright House Networks.
Back then, the Obama-era FCC was crafting net neutrality rules, and one of the more controversial discussions pertained to interconnection agreements, also called peering. A video service like Netflix tends to be a data hog, and ISPs argued that it was reasonable to negotiate commercial arrangements with content providers to ensure infrastructure accommodated high volumes of traffic. Ultimately, the FCC didn’t ban interconnection agreements, and in any event under the leadership of Ajit Pai, the FCC moved to repeal net neutrality rules.
But thanks to the merger conditions, Charter hasn’t been able to charge interconnection fees to streamers. In fact, after Charter swore off doing so, Netflix came around to support the merger while the Department of Justice pointed to the interconnection condition as relieving its significant concerns that Charter could become a gatekeeper for internet-based services, that higher internet interconnection fees that could have limited streamers’ ability to compete effectively with traditional cable and satellite operators. The conditions on the merger were set to expire after seven years, in 2023, but the FCC included a mechanism to seek an expiration two years early. Charter is now exercising its option to seek early termination of conditions.
“[I]n the years since the Conditions were imposed, [online video distributors] are even more numerous, more popular, and more formidable today than they were in 2016,” states the petition. “Seemingly insatiable consumer demand for content only bolsters their already strong interconnection negotiating positions.”
Charter points to a flourishing market despite reported interconnection agreements between Netflix and other ISPs including Comcast, Verizon and AT&T, plus how streamers and others (e.g. Google’s YouTube) now enjoy alternative ways to get to consumers beyond last-mile broadband connections.
In pushing for the FCC to recognize the public benefit of explicitly allowing interconnection agreements by ending conditions on May 18, 2021, Charter also stresses just who it will be negotiating with across the table.
“Indeed, the entities on the other side of the negotiation include some of the biggest names in technology: Netflix, Google, Akamai, Amazon, Facebook, Apple, Microsoft, Dropbox, and Yahoo,” continues the petition. “The Commission recently observed that large edge providers such as Amazon and Google, both of which control a significant portion of the OVD market, likely enjoy significant market advantages that restrain broadband providers’ exercise of power. That disparity has only grown since 2018: Only four U.S. companies have achieved market capitalizations exceeding $1 trillion — Apple, Amazon, and Alphabet, and Microsoft — and all four are parent companies of OVDs and/or OVD platforms. Compare this to Charter’s market capitalization of roughly $124 billion, and it is clear that OVDs are formidable economic entities.”
Here’s the full petition. Charter’s other big ask is to sunset the condition on imposing data caps.
The FCC responds that it will now take public comment about Charter’s petition.
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